DotEcon supports BT in its appeal of Ofcom’s APCCs Determination

On 11 January 2016 BT lodged an appeal with the Competition Appeal Tribunal (CAT) against Ofcom’s Final Determination of two disputes concerning BT’s average porting conveyance charges (APCCs).1

The two disputes were brought by Vodafone and Gamma on the back of Guidance published by Ofcom in September 2014 in relation to General Condition (GC) 18.5(a).2 GC 18.5(a) requires that any charges for the provision of number portability made by a Communication Provider is cost orientated.3 In Ofcom’s Guidance it stated that for the purposes of GC 18.5(a) cost orientation would be assessed by reference to the pure Long Run Incremental Cost (pure LRIC) cost standard rather than the LRIC plus cost standard, which includes a mark-up for common costs.

In its Final Determination Ofcom concluded that BT had overcharged each of Gamma and Vodafone for number portability services because it had calculated APCCs using the LRIC plus cost standard rather than pure LRIC. Ofcom directed BT to make a repayment of the difference to each of Gamma and Vodafone.

BT has appealed Ofcom’s Final Determination on the following three Grounds of Appeal:

Ground 1: APCCs fall outside of the scope of GC 18 because they are charges for “inter-switch conveyance” services which are not necessary to the provision of number portability. Even if inter-switch conveyance falls within the scope of GC 18 the charges did not infringe the cost orientation condition.

Ground 2

Ground 2(a): Ofcom had no lawful basis to amend the effect of GC18.5(a) to exclude BT’s ability to recover common costs.

Ground 2(b): GC 18.5(a) provided for an exception allowing BT to agree another basis for its charges and BT contends that it had done this, with the result that the cost orientation obligation did not apply.

Ground 3: Even if Ofcom had the lawful basis to change the relevant cost standard its decision was based on inadequate and erroneous reasoning. The change in cost standard was unnecessary and disproportionate and would be harmful to competition, efficiency and innovation.4

Dr Dan Maldoom, Co-founding Partner of DotEcon, provided an expert report in support of BT’s appeal. Dr Maldoom’s expert report, submitted to the CAT, considers economic matters relating to Ofcom’s Final Determination. In particular, Ofcom’s justification for using pure LRIC rather than LRIC plus as the cost orientation standard for porting conveyance services; and Ofcom’s arguments and analysis supporting the continuation of onward routing.

Footnotes

Ofcom, 11 November 2015, Disputes between BT and each of Gamma and Vodafone in relation to BT’s average porting conveyance charges – Final Determination, http://stakeholders.ofcom.org.uk/binaries/enforcement/competition-bulletins/open-cases/all-open-cases/cw_01161/Final_Determination.pdf [↩]

Ofcom, 29 September 2014, Porting charges under General Condition 18, Guidance on the setting of porting charges in compliance with GC18 and consultation on a new mobile donor conveyance charges Direction http://stakeholders.ofcom.org.uk/binaries/consultations/gc18-sep14/summary/Statement_on_Porting_Charges_under_GC18.pdf [↩]

DotEcon Online Seminars

DotEcon runs an online seminar programme about topics of general interest linked to our work. Past online seminars have covered, for example, spectrum auction design, e-commerce and its impact on competition, or the role of regulators in disputes amongst firms.Our seminars are by invitation only, with invitations usually being sent around a week before the seminar is run. If you would like more information or be kept up-do-date with the programme in general, please send us an email.